Throwing the baby out with the bathwater; political soundbites vs. The law of Unintended Consequences


Throwing the baby out with the bathwater; political soundbites vs. The law of Unintended Consequences

Those of you with long memories may remember back in January 2014 Chuka Unumma, (Labour MP for Streatham and briefly a candidate for Labour leadership), using parliamentary privilege, accused all of the large recruitment companies of exploiting workers by pressing personal accident and sickness policies on them. Back at the time there was a big fuss in the press and now all recruitment companies are violently allergic to any insurance add-ons, for fear of being accused of profiteering again. Vince Cable promised an investigation by the Department of Business, Innovation and Skills, but I am struggling to find any details of a pending report, so either it is still on-going or little was found.

In his attack on the recruitment agencies, Chuka Unumma stated

"I've been passed evidence which suggests Blue Arrow, Staffline, Acorn, Taskmaster, Randstad and Meridian - employment agencies employing over 100,000 workers - have been miss-selling personal accident insurance to workers which they arguably do not need and from which those agencies have been profiteering.”

He argued that the agencies’ own insurances would cover the agency staff, so the temporary workers would have no need for such plans.

In practise, I would suggest that he was taking too narrow a view; payments based on negligence will take months or years to be settled and the claimant still needs to live in the interim; illness could stop you working, without fault from anyone and just crossing the road at the wrong time could wipe you out. If you are a temporary UK resident, you may have no access to welfare payments in any case, so the weekly policy could be a real lifeline.

One agency, Acorn said its scheme was brought in because of two cases where its temporary workers died while working in the UK and the families were unable to meet the cost of flying their bodies home.

Most of these policies were weekly paid, (by deductions through the payroll), life, accident and sickness plans, with minimal underwriting, (so automatic acceptance!) and claims payments often being made via the payroll. Take up from temporary employees was high compared to the bulk of the working population, so either it met a real need or the agencies were using undue influence to place them, (which they denied vociferously).

Back in the early days of trade unions, this sort of self-help was provided as part of union membership or separately by an industrial and provident society, as until the Welfare State, you either worked and supported yourself or you entered the Workhouse. As union membership has declined, (and to my jaundiced eye, unions have abandoned the day to day needs of their members to persecute a “class struggle”), life and sickness benefits have either fallen to the State or the private sector.

As IFAs, we are convinced of the value of personal insurances, such as life cover, personal accident or income protection, but we also appreciate that the complexities of these plans make purchasing them far from simple. All of the plans we advise on have full underwriting, so acceptance is far from automatic, so we would be unable to offer suitable cover at an acceptable price to the chronic sick, the obese, the temporary UK resident and many older workers. For the young, healthy, slim, permanent UK resident we can offer inexpensive, comprehensive plans with higher pay outs on a fully advised basis, but I do not see a queue of applicants around the corner.

Chuka Unumma, by throwing the recruitment agencies to trial by media, (which so far appears to be smoke without fire), seems to have killed a popular piece of self-help with temporary workers, leaving them at the tender mercies of the State for sickness and “no win no fee” lawyers for negligence claims.

Maybe the trade unions and recruitment agencies need to set up a not-for-profit joint venture offering a weekly paid block policy offering life, sickness and accident protection with a legal protection add-on for industrial accident claims to meet the real needs of temporary workers. Let us have a little less political posturing and a little more product innovation.

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